Economic Integration Breeds Foreign Investment: Evidence from the Portfolio Allocation of Investment Funds around the World
60 Pages Posted: 18 Mar 2011 Last revised: 7 Jul 2018
Date Written: March 1, 2017
Abstract
We examine whether expansions into new geographic markets help firms attract new international portfolio investors. Combining detailed location-level data of firms’ foreign operations and investment funds’ holdings across 47 countries, we show that foreign funds increase their portfolio allocation in firms that establish closer operational ties with funds’ home countries. This relationship is robust to alternative identification strategies using home-country tariff changes and new free-trade agreements. Domestic funds are less responsive to firms’ global expansions than foreign funds. Overall, our results indicate that firms’ cross-border economic linkages appear to propagate information that also drives their global financial integration.
Keywords: Integration, foreign investments, investment biases
JEL Classification: F21, F30, F36, G11
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Why are Foreign Firms Listed in the U.S. Worth More?
By Craig Doidge, George Andrew Karolyi, ...
-
Why are Foreign Firms Listed in the U.S. Worth More?
By Craig Doidge, George Andrew Karolyi, ...